Thoughts and feedback on the ETF portfolio

bigfreddiel

Well Pizza_lord you seem to have countered every bodies comments on your strategy, so I would suggest you just go for it.

In fact at the end of the day, it doesn't really matter what you do if you stick with your 40/60 blend of etf's.

Good luck fj

pizza_lord

masonic wrote: »

I'd hoped our thorough debunking of this "tool" in your last thread would have put you off using it.

No doubt Linton was using actual performance data from the last 3 years to determine the return over the last 3 years, which is what most people would do. Your tool uses monte carlo simulation using a narrow dataset, which is why it "predicted" the past performance of your last portfolio as being 10% when it was actually less than 3%.

QPP doesn't predict the past 3 years when that's the data range I give it. It fetches the last 3 years of data from finance.yahoo.com and works from that.

masonic wrote: »

Perhaps it is finally time to look for another tool? I would recommend Trustnet's portfolio tool, which is free.

Thanks I will take a look at that.

masonic

pizza_lord wrote: »

QPP doesn't predict the past 3 years when that's the data range I give it. It fetches the last 3 years of data from finance.yahoo.com and works from that.

In that case I have no idea why the figures it is spitting out are so inaccurate, but inaccurate they certainly are, especially so in your earlier case.

bowlhead99

pizza_lord wrote: »

What online tools are you using to lead you to that conclusion?

Did you see what IBTS, SWDA, IBTM and IUSA did in the last 3 years?

Yes I did. Let's take IBTS for example, US treasury bonds maturing within 1-3 years. They yield between half a percent and a percent. The gain on IBTS in dollar terms over the last three years has probably been a couple of percent total. However, sterling has weakened from $1.55ish to $1.40 ish, so the same US denominated ETF is worth 10% more to a Brit investor. Obviously that can't continue indefinitely. So, you're unlikely to get your ten percent per annum from that one.

Similarly the 7-10 year maturity US treasuries held by IBTM have very little chance of producing more than low single digit returns. Per Google, IBTM's price on 12 April 2013 was $202.20. Today it's $205.45. In the meantime there was $11.70 of dividends. A return of $15 plus some nominal amount for dividends reinvested, on a $202 cost. Generously that's 8% total for the three years but not even 3% per annum annualised.

Again the whole amount will have had a 10% boost for a sterling investor because he sees the sterling price is now £144 from £131 which is 10% even before the value of the dividends, so maybe his total return is more like 17%for the three years instead of 7%. Still way under your 10% per annum target. But as that 10% "bonus" will reverse over time, you'd be mad to use it in your estimate of what you'll get. You should be taking it off instead of adding it on!

The only one of the funds that delivered 30% in base currency over the 3 year period was the US S&P500. Well done the S&P continuing bull market. Will that rate of return continue from current prices? Most think that it won't.

I would like an ETF where I get dividends and I have the option of re-investing them in the same ETF without the cost of doing a new transaction. Is that possible?

There is such thing as an accumulating ETF in some markets. However, no broker is going to reinvest income for you into regular ETFs for free. The clue is in the name -exchange Traded funds. If you want to buy a few more shares you buy them on an exchange, and that incurs dealing costs.

Linton

pizza_lord wrote: »

Again what tools are you using? Am using Quantext. The QPP tool assume re-balance happening once per year and dividends getting re-invested so my results will differ from your but I am curious as to what tools you are using.

Looking at the performance data for each investment from www.trustnet.co.uk and accumulating them in line with your % allocations.

pizza_lord

So what would be a better bond option here for the bond / gilts part of my portfolio?

Linton

pizza_lord wrote: »

So what would be a better bond option here for the bond / gilts part of my portfolio?

What is the primary objective of the bond portfolio part of your portfolio? Reduce overall volatility? Capital diversification? Income diversification? Depending on your objctives I can see arguments for cash, corporate bonds, EM and similar bonds, physical property, absolute return funds, P2P, or replacing it with equity. Finding a justification for gilts or US treasury bonds seems rather more difficult to me.

Dird

Linton wrote: »

The portfolio looks rather unbalanced to me with the equity being 2/3 allocated to the USA. USA large companies have done particularly well over the past 3 years, perhaps held up by Apple, Google, Facebook etal. This isnt guaranteed to continue.

https://www.youtube.com/watch?v=hX_AmdTwmlk&t=45s

racing_blue

Pizza Lord, i am 60:40 too.

My starting point: Vanguard Lifestrategy 60%

Right now I don't see an upside in bonds, as an asset class. So my revised starting point: VWRL 60%, cash 40%.

I think an investor needs a reason to stray from the simplest possible solution to their your needs. Personally, I want to actively manage a portfolio, for pleasure. So I broadened my scope to VWRL 30%, actively managed 30%, cash 20%, commodity speculation 20%.

Within the actively managed 30%, are some regional index ETFS (such as BRIC 50, Greece, UK.), and some individual companies (such as Tesla, Zoopla, Circle Holdings). I enjoy following these sectors and companies and predicting their fortunes, rightly or wrongly.

What is your reason for straying from the most simple possible solution- which would seem to be a 2 fund portfolio?

darkidoe

There's no mention of the size of the portfolio. I agree with the above that the key to an etf portfolio is minimising transaction costs, ie number of funds,trading costs, number of rebalancing etc. There are 7 etfs u listed with potential for more if you're picking more specialist tech etfs in the future. Each time u rebalance your portfolio, it's going to cost u potentially 7x trading cost times the number of times u do this per year.

I just set up my own etf portfolio as well with 5 etfs, which I think is quite a lot already, covering Global Value (25%), Asia Pacific ex Japan(25%), Emerging Markets(15%), Europe(25%) and US(10%). I have 1-2 years worth of cash to cover outgoing expenses and hold no bonds. I think I will probably add in a Bond etf next year during my next big buy. I am hoping this diversification will cover most of the global markets returns but I am probably in for a bumpy ride next couple of years.